US Dollar trims losses on Yellen statement

New York (Mar 27)  The dollar trimmed its losses against major currencies on Friday after Federal Reserve Chair Janet Yellen delivered her comments on monetary policy.

The head of the central bank said that an increase in core inflation was not essential to raising rates. Nevertheless, weaker inflation levels or lower wages, would cause the Fed to hold off on its first rate hike in nine years.

The euro traded at $1.0882, up about 0.1 percent, following Yellen's statement. It traded above $1.09 shortly ahead of the statement.

The dollar was last flat against the yen at 119.20, up from 119.13 yen ahead of Yellen's statement. The dollar remained little changed against the Swiss franc at 0.9608 franc.

The dollar index traded near the flat line at 97.39 after being down 0.2 percent at 97.26 before the statement.

Traders were wary of bidding up the dollar ahead of the speech after the currency posted its biggest one-day rise against a basket of major currencies in a week on Thursday. The euro was last up 0.2 percent at $1.0903.

"Until there is a bigger news event, it seems like the (euro's) downside is demarcated near the lows in $1.08 and the top side is $1.1050," said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York. "Yellen will be the arbiter in terms of which side of that range we're going to go to."
The dollar index, which measures the greenback against a basket of six major currencies, rallied over 25 percent from early May last year through March 17. The dollar has since given back a portion of those gains since after the Fed's latest policy statement on March 18 suggested a less aggressive timeline for hiking benchmark U.S. interest rates.

Analysts said the long-term uptrend in the dollar remained in place, however, given the likelihood that the Fed will hike rates this year and the recent start of the European Central Bank's bond-buying stimulus in Europe.
"Nobody really wants to go home long euro, it's not the good side of the market," said Lane Newman, director of foreign exchange at ING Capital Markets in New York.

Source: CNBC